The legal and regulatory environment of business 16th edition reed test bank

02
Student: ___________________________________________________________________________

1.

Federal sentencing guidelines reduce criminal fines for legal violations in companies that have taken
specific steps to self-police ethical/legal conduct.
True False

2.

Economist Adam Smith believed that humans could not look beyond self-interest.
True False

3.

Growing diversity in the workplace has reduced concerns over ethical values.
True False

4.

Diverse societies are characterized as societies that have a single, unified system of ethical values that
guide behavior.
True False

5.

Because of the increased influence of the Internet and extensive coverage of business in the news media,
it has become increasingly difficult for businesses to hide questionable behavior.
True False

6.

Federal law reduces criminal penalties for companies that take steps to control their ethical conduct.
True False

7.

Adam Smith, the author of The Wealth of Nations, perhaps the most famous book on economic
theory ever written, denied the existence of any moral element in human nature that goes beyond selfinterest.
True False

8.

It is appropriate for those engaged in international business to assume that all countries have the same
ethical and moral values.
True False

9.

Ultimately, the commitment to ethical values is superior to mere observance of the law in ensuring
responsible business behavior.
True False

10. Formalism is primarily a duty-based view of ethics that creates moral obligations that one must satisfy in
order to be ethical.
True False
11. The foundation of John Rawls's social contract theory is a firm belief that self-knowledge and selfpromotion will create the most just society.
True False
12. Businesses working in the international arena find social contract theory especially valuable because it
promotes the idea that all parties deserve an equal opportunity for achievement, regardless of the country

or system of laws they come from.
True False
13. The social contract theory acknowledges that there are significant social and economic inequalities, but
these inequalities should exist solely based upon what a person does, not on who a person is.
True False
14. Within a strict utilitarian system of ethics, an action is considered unethical if it is inherently wrong,
regardless of the circumstances under which the action is taken.
True False


15. Modern business ethics reflects elements of both formalism and consequentialism, but tends to focus
more heavily on consequentialism.
True False
16. The Protestant ethic proved to be a great influence on modern capitalism, but its focus on absolute moral
values was replaced by a focus on wealth and mass consumption.
True False
17. A formalist would conclude that a business's secret monitoring of employees is ethical if the monitoring
reveals a significant number of crimes or malfeasance, providing a net good for the business.
True False
18. Looking into the initial intentions of parties to a business contract evidences consequentialism.
True False
19. It is unlikely that a business or professional organization would look to law or legislation when drawing
up an internal code of ethical conduct.
True False
20. Courts often use a balancing test when examining whether a party acted with due care in negligence
cases.
True False
21. The legal requirement of honoring confidentiality contains both formalist and consequentialist ethical
values.
True False

22. There is no way to create enough rules to cover all possible ethically significant situations, even if they
could be identified in advance.
True False
23. Ambrose Bierce posited that individuals in large groups such as corporations feel more responsibility and
accountability for what happens in the group than they do for what happens in their individual lives.
True False
24. Of the world's 100 largest economies, 49 of them are countries and 51 are companies.
True False
25. Profits and business ethics are not contradictory.
True False
26. Those who argue that a system of property ownership is ethically moral do so by appealing to strict
formalism, arguing that the morality of property rights should be determined on an individual basis.
True False
27. A business that does not act ethically severs itself from society, from the good, and ultimately from its
own source of support.
True False
28. Because property is a legal system created to focus on individual ownership, it contains no issues of
morality.
True False
29. To harm others' safety and health, freedom of choice, or liberty of movement is to infringe their right of
property.
True False
30. A major concern of those who criticize property is the power over others conveyed by the possession of
great capital resources.
True False


31. The Wealth of Nations was written by _____.
A. Adam Smith
B. Karl Marx

C. Emmanuel Kant
D. Euripides
E. Socrates
32. Federal law and business leaders alike favor _____ as a means of governing private business ethics.
A. creating uniform statutes of business ethics
B. self-regulation by companies
C. giving the federal government exclusive jurisdiction regarding ethics and ethics violation enforcement
D. establishment of federal regulators in all private companies to establish and enforce ethical standards
E. case-by-case determinations of what constitutes a breach of business ethics
33. Which of the following provides the best definition of ethics?
A. Ethics is a formal system for evaluating who profits in a business transaction.
B. Ethics is merely a different term for the laws and regulations created by a government.
C. Ethics is merely another word for morality, which is only involved in what is right and what is wrong.
D Ethics is a simplified term given to the momentary decisions we all make regarding which answer will
. lead each person to the most personally successful solution.
E. Ethics is a formal system for deciding what is right and wrong and for justifying moral decisions.
34. Which is the best definition of "the good", as defined by philosophers?
A. Increasing profit margins on a quarterly basis.
B. The moral goals and objectives we choose to pursue.
C. The acquisition of all of the things necessary for having a good life.
D. Whatever makes an individual happy.
E. Eating meat and consuming alcohol.
35. Mike is driving 15 miles over the posted speed limit when he is pulled over by Tom, a local police
officer. As Tom approaches the car, he hears Kathy in the front seat moaning in pain. Mike tells Tom that
Kathy is in labor and that he is rushing to the hospital. Tom issues Mike a speeding ticket, nevertheless.
Tom's ethical approach in this matter most closely matches:
A. utilitarianism.
B. relativism.
C. the Protestant ethic
D. formalism.

E. hedonism.
36. Ethical formalists maintain that:
A. harm to an individual is allowable as long as it serves a greater good.
B. values are situational and change based on circumstance.
C. harm to individual rights is never justified by an increase in organizational or common good.
D. the good of the many always supersedes the good of the few.
E. right and wrong are unknowable.
37. The _____ emphasizes consistency and compels a person to act as he believes everyone should act.
A. formalist theory
B. deontological imperative
C. categorical imperative
D. contractualist approach
E. relativistic approach
38. Who developed the theory of the categorical imperative?
A. Socrates
B. Plato
C. John Rawls
D. Immanuel Kant
E. Charles Darwin


39. For Immanuel Kant, to be ethical requires that a person act:
A. only under coercion.
B. only to benefit himself.
C. out of a sense of duty.
D. with a good intent.
E. without the influence of others.
40. Who developed the social contract theory?
A. John Rawls
B. Immanuel Kant

C. John Locke
D. Jack Sheppard
E. Plato
41. The social contract theory concerns itself with how to construct a just society given:
A. the many inequalities of wealth, knowledge, and social status.
B. the difficulty of acting toward others as you would have them act toward you.
C. the many logical fallacies contained in legal contracts.
D. the implicit agreement that the powerful are best suited to govern.
E. the inherent nature of those in a society to argue and reject consensus.
42. According to Rawls, it is important to forget our own age, gender, race, intelligence, strength, wealth, or
social status when determining just actions. What is the purpose of this?
A. This permits us to act as pure American citizens.
B. It keeps us from being self-interested in the ethical values we consider.
C. This makes each individual like a blank sheet of paper on which a contract may be written.
D. It makes it easier to consider the usefulness of our actions.
E. This promotes the assumption that what one personally needs or wants is morally correct.
43. The "veil of ignorance" means that to think ethically you must:
A. lose the assumption that what you personally want or need is necessarily morally correct.
B recognize that one cannot make valid ethical decisions unless they are totally unaware of the other
. parties involved so as to eliminate bias.
Crecognize that one cannot make valid ethical decisions unless they are totally unaware of the
. circumstances leading to the ethical dilemma so as not to be influenced by unchangeable history.
D. put yourself in the position of those affected by your decision and act as you would want them to act.
E. make every ethical decision as if you did not have any education in ethical or moral history.
44. Making ethical or moral decisions to promote the common good is a significant principle of ethical
_____.
A. existentialism
B. daoism
C. utilitarianism
D. self-promotion

E. fundamentalism
45. The dominant form of consequentialism is:
A. utilitarianism.
B. social contract theory.
C. the categorical imperative.
D. the Protestant ethic.
E. Marxism.


46. The values-based management approach to business ethics illustrates consequentialism through its
emphasis on:
A. teaching ethical values to management and supervisory personnel that enhances the profitability of the
company.
B. teaching ethical values to all employees that enhance the profitability of the company.
C teaching ethical values to management and supervisory personnel with the aim of avoiding ethical
. issues whether profitability is affected or not.
D. teaching ethical values to all employees with the aim of avoiding ethical issues whether profitability is
affected or not.
E. teaching ethical values to employees in order to punish them for unethical conduct.
47. Since the primary goal of business is to make a profit, this orientation mainly involves:
A. deontology.
B. formalism.
C. consequentialism.
D. absence of ethics.
E. Darwinism.
48. Business ethics reflects elements of:
A. formalism only.
B. consequentialism only.
C. both fundamentalism and consequentialism with a focus on formalism.
D. both fundamentalism and consequentialism with a focus on consequentialism.

E. neither formalism nor consequentialism.
49. The Protestant ethic is rooted in:
A. utilitarianism.
B. consequentialism.
C. relativism.
D. formalism.
E. epistemology.
50. According to sociologist Robert Jackall's view of the modern bureaucratic managerial system, how has
the Protestant ethic changed over time?
A. The Protestant ethic has become the only viable ethical system for American corporations.
B. The profiteering of the Protestant ethic became a justification for economic excess.
C. The religious consequentialism of the Protestant ethic became the dominant system of formalistic
morality.
D. The Protestant ethic collapsed as a viable ethical system.
E. The religious formalism of the Protestant ethic has become a type of utilitarian consequentialism.
51. Opponents of the Civil Rights Act of 1964, in an attempt to prevent its passing, inserted a prohibition
against _____ discrimination in employment, thinking that such discrimination was acceptable and that
many others agreed with them.
A. age
B. religious
C. sex
D. race
E. ethnic
52. Which of the following is NOT an ethical rule of legal regulation?
A. Respect for the liberty and rights of others
B. Exercising due care
C. You are your brother's keeper
D. Acting in good faith
E. Avoiding conflicts of interest

53. Who, among the following, does not have a duty of confidentiality?
A. An attorney
B. A real estate broker
C. A physician
D. A mechanic
E. A certified public accountant
54. In which of the following situations is there a conflict of interest?
A. A judge who occasionally shops in a store that is involved in a case before the same judge.
B. A real estate agent representing the buyer and seller of a house with permission from the buyer and
seller.
C. An agent working for a competitor of the agent's principal.
D. A bank regulator using a credit union.
E. A lawyer discussing a case with his or her boss.
55. Which of the following is a national group of senior business leaders that has identified a general list of
topics that organizational codes of business ethics should cover?
A. The Corporate Deciders
B. The Business Roundtable
C. National Business Ethics Survey
D. The Board of Review
E. The Springfield Armory
56. Hannah Arendt believed that immoral behavior was often the result of:
A. apathy.
B. ignorance.
C. thoughtlessness.
D. boredom.
E. anger.
57. Plato wrote that immoral behavior often flows from _____.
A. apathy
B. ignorance

C. thoughtlessness
D. boredom
E. anger
58. Stakeholder theory suggests that ethical corporate behavior:
A. strongly relies on government interaction.
B.focuses on whether corporate actions take the interests of all employees into account before making
significant business decisions.
C. depends on managers who recognize and take into account the various people whose interests the
corporation impacts.
D. takes unacceptable risks only when the risk has a reasonable likelihood of enriching the stakeholders
net worth substantially.
E. requires interaction between managers and customers to promote profit sharing.
59. Which of the following is credited with this expression: "[T]he theory of the Communists may be
summed up in a single sentence: Abolition of private property."
A. Bertrand A. Russell
B. Karl Marx
C. Samuel Adams
D. Justice Potter Stewart
E. Albert Camus


60. Supporters of private property contend that adequate property in resources maximizes _____.
A. gender equality.
B. total resources for each individual.
C. religious devotion.
D. total wealth in society.
E. communal fairness.
61. The poor may benefit from a private property system more than the rich because private property systems
promote _____.
A. diversification of financial obligations.

B. protections of all citizens' resources.
C. accumulation of wealth.
D. unethical conduct.
E. gender equality.
62. What is created through the morality of property, or the legal right to exclude others from the resources
one has or acquires?
A. A veil of ignorance
B. A categorical imperative
C. An economic interdependence
D. A field of protection
E. An exclusive private sphere
63. How does the 2008 economic recession illustrate the potential problems of economic interdependence?

64. How would a formalist and a consequentialist view an employer secretly monitoring an employee's email messages?

65. What potential problems arise from the modern corporate structure and its dependence on separation of
the managers from the owners?


66. Civil rights leaders in their quest to promote civil rights and equality often held peaceful marches and
non-violent sit-ins that they understood to be at times illegal. Their justification for their actions was to
promote and give focus to inequities with the ultimate aim of reducing discrimination and establishing
equal rights for all. Were these leaders acting ethically? Fully explain your answer citing the ethical
theory you believe to apply.

67. Placing himself behind a wall of self-ignorance, Rawls proposed what ethical principles?

68. Peter is an 84-year-old with a heart condition. He has no family and minimal health insurance. He is
on a fixed income and barely has enough money to survive. His doctor tells him that he needs to take a
particular medicine for three months or his condition will severely worsen. The medicine will cost $450

and only $150 of the cost is covered by insurance. Peter goes to the bank and hands the teller a note
saying, "Give me $300.00 or I'll detonate a bomb." When Peter is later apprehended, he told the police
that he stole the money to buy needed medicine. Understanding that bank robbery is a crime, is there an
ethical theory that can serve to justify Peter's actions?

69. Of the two main systems of ethics, which do you think is better for a corporate philosophy? Compare the
two giving examples of each and potential problems.

70. How could a utilitarian argue for the view that the tobacco industry is a positive part of society?


71. What roles do regulations serve in promoting or frustrating ethical decisions in the business world? Do
you think there should be more or less regulations on business?

72. Is the concept of due care a formalist or consequentialist concept? What are the difficulties in applying
this to business actions?

73. Trevor works at Trevsinc, a company that has been buying from Stigg Corp for years. Stigg Corp., a
private corporation, has been doing very well recently, and will soon go public, selling its stock on the
open market. As appreciation for his years of loyal service, Stigg Corp. offers Trevor the option of buying
a large block of stock at a low fixed price before the initial public offering. However, over the last few
months, Trevor has been concerned that the management of Stigg Corp. may not be acting ethically,
and that the success may be because of the management's risky actions. What ethical issues must Trevor
consider?

74. What are the purposes of permitting self-regulation, and what potential issues may arise from letting
certain industries police themselves?

75. When facing an ethical dilemma, what questions should you ask yourself before making a personal or
business decision?

76. Do you think it is practical to live by the categorical imperative in a corporate world? What problems
could arise by applying this philosophy in a business perspective?

77. Achieving and maintaining an ethical business corporation is a laudable but difficult task. What are some
of the obstacles that a corporation faces, by its very nature, in seeking an ethical culture?

78. Even with a code of ethics, why is it important for top management in a corporation to set an example for
ethical conduct?

79. What is meant by stakeholder theory and who are the stakeholders of a corporation?

80. What were the four observations made by the Spanish journal, Boletin Circulo, about business ethics?

81. Why should businesses promote openness in communication?


82. How might corporate managers promote a culture of open communication within a corporation?

83. Much has been made in recent years of the disparity of property in the United States. Many say that it
is unjust that a small percentage of Americans can own and control a large majority of the country's
wealth and resources. Many oppose this view, responding that the very nature of property acknowledges
that some may have more than others, but are not immoral for using or controlling more resources.
Discuss the various views on the morality of property and your own views on modern America's property
disparity.


02 Key
1.

Federal sentencing guidelines reduce criminal fines for legal violations in companies that have taken
specific steps to self-police ethical/legal conduct.
TRUE
Federal sentencing guidelines reduce criminal fines for legal violations in companies that have taken
specific steps to self-police ethical/legal conduct.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #1
Topic: Contemporary Business Ethics

2.

Economist Adam Smith believed that humans could not look beyond self-interest.
FALSE
Adam Smith recognized a moral element in human nature that goes beyond self-interest.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #2
Topic: The Nature of Ethics

3.

Growing diversity in the workplace has reduced concerns over ethical values.
FALSE
Diversity fosters concern over values, and in recent years American society has become more openly

pluralistic. Several trends illustrate society's concern over the possible fragmentation of ethical values
at home, at school, and in business.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #3
Topic: The Nature of Ethics

4.

Diverse societies are characterized as societies that have a single, unified system of ethical values that
guide behavior.
FALSE
Ours is a diverse society, formed from many ethnic backgrounds, races, and religions. As a result,
we have few shared ethical values to guide behavior. When a business decision maker does not share
common values with society in general, any decision made has a greater likelihood of arousing ethical
concern than if there is a common code of behavior and universally accepted values.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #4
Topic: The Nature of Ethics


5.

Because of the increased influence of the Internet and extensive coverage of business in the news
media, it has become increasingly difficult for businesses to hide questionable behavior.

TRUE
From the coverage of stock market manipulations to accounts of Enron's and Arthur Andersen's
collapse, the news media and Internet heighten public attention and concern. What used to be
considered private is now considered public. The ethical issues that surround nearly every significant
business decision are easier to see than they once were.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #5
Topic: The Nature of Ethics

6.

Federal law reduces criminal penalties for companies that take steps to control their ethical
conduct.
TRUE
By reducing criminal fines for companies that have taken specific steps to self-police ethical/legal
conduct, federal law encourages self-regulation.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #6
Topic: The Nature of Ethics

7.

Adam Smith, the author of The Wealth of Nations, perhaps the most famous book on economic
theory ever written, denied the existence of any moral element in human nature that goes beyond selfinterest.

FALSE
Adam Smith wrote, "However selfish man believes himself to be, there is no doubt that there are some
elements in his nature which lead him to concern himself about the fortune of others, in such a way
that their happiness is necessary for him, although he obtains nothing from it except the pleasure of
seeing it."
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #7
Topic: The Nature of Ethics

8.

It is appropriate for those engaged in international business to assume that all countries have the same
ethical and moral values.
FALSE
Internationally, businesses often face problems when they do business with nations with different
moral values. What is wrong in the United States may be right somewhere else and vice versa.
AACSB: Ethics
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #8
Topic: The Nature of Ethics


9.

Ultimately, the commitment to ethical values is superior to mere observance of the law in ensuring

responsible business behavior.
TRUE
Ethical systems also involve a broader-based commitment to proper behavior than does the law. Law
sets only the minimum standards acceptable to a society.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #9
Topic: The Nature of Ethics

10.

Formalism is primarily a duty-based view of ethics that creates moral obligations that one must satisfy
in order to be ethical.
TRUE
Formalism is an approach to ethics that affirms an absolute morality. A particular act is in itself right
or wrong, always and in every situation. For example, lying is wrong. There are no justifications for it,
and its wrongness does not depend on the situation in which the lie is told.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #10
Topic: Two Systems of Ethics

11.

The foundation of John Rawls's social contract theory is a firm belief that self-knowledge and selfpromotion will create the most just society.
FALSE

Rawls suggests a simple first step in determining the ethical values on which a just society can be
built. We should assume that we do not know our age, gender, race, intelligence, strength, wealth, or
social status. This step is vital because it keeps us from being self-interested in the ethical values we
consider.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #11
Topic: Two Systems of Ethics

12.

Businesses working in the international arena find social contract theory especially valuable because
it promotes the idea that all parties deserve an equal opportunity for achievement, regardless of the
country or system of laws they come from.
TRUE
Social contract theory is especially valuable in international business where, in the absence of much
law, businesses from various cultures must agree as to the terms under which international business is
to take place.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #12
Topic: Two Systems of Ethics


13.

The social contract theory acknowledges that there are significant social and economic inequalities,
but these inequalities should exist solely based upon what a person does, not on who a person is.
TRUE
Though there may be social and economic inequalities, these inequalities must be based on what a
person does, not on who a person is, and everyone must have an equal opportunity for achievement.
Since there are natural differences of intelligence and strength and persistent social differences of
wealth, class, and status, defining "equal opportunity" is crucial to this ethical principle.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #13
Topic: Two Systems of Ethics

14.

Within a strict utilitarian system of ethics, an action is considered unethical if it is inherently wrong,
regardless of the circumstances under which the action is taken.
FALSE
If actions increase the common good, they are ethical. If actions cause overall harm to society, they
are unethical. The dominant form of consequentialism is utilitarianism. Utilitarianism judges actions
by usefulness, by whether they serve to increase the common good. For utilitarians, the end justifies
the means.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #14
Topic: Two Systems of Ethics

15.

Modern business ethics reflects elements of both formalism and consequentialism, but tends to focus
more heavily on consequentialism.
TRUE
Although these two systems are not mutually exclusive in the outcomes of their moral analyses, they
begin from different assumptions. Most people adopt elements of both systems in making ethical
choices.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #15
Topic: Two Systems of Ethics

16.

The Protestant ethic proved to be a great influence on modern capitalism, but its focus on absolute
moral values was replaced by a focus on wealth and mass consumption.
TRUE
The part of the Protestant ethic that supported hard work, success, and rational planning continued,
but without the original absolute moral values. The Protestant ethic became transformed into an
organizational ethic that supports the modern bureaucratic managerial system.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #16
Topic: Two Systems of Ethics

17.

A formalist would conclude that a business's secret monitoring of employees is ethical if the
monitoring reveals a significant number of crimes or malfeasance, providing a net good for the
business.
FALSE
Formalists might say that secret monitoring treats employees only as a means to the end of increasing
organizational efficiency and does not respect their self-worth as individuals. The monitoring also
does not respect their dignity and their privacy.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #17
Topic: Two Systems of Ethics

18.

Looking into the initial intentions of parties to a business contract evidences consequentialism.
FALSE
For a formalist, a particular act is in itself right or wrong, always and in every situation. For example,
lying is wrong. There are no justifications for it, and its wrongness does not depend on the situation
in which the lie is told. For the consequentialist, lying itself is not unethical. It is the consequences, or
end results of lying, that must be evaluated for their ethical implications. It is the loss of trust or harm
done by lying that is unethical.
AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.

Reed - Chapter 02 #18
Topic: Two Systems of Ethics

19.

It is unlikely that a business or professional organization would look to law or legislation when
drawing up an internal code of ethical conduct.
FALSE
Legal regulation is a significant source of values for business ethics. In our society ethical values
frequently become law and legal regulation can reflect society's ethical values.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #19
Topic: Sources of Values for Business Ethics

20.

Courts often use a balancing test when examining whether a party acted with due care in negligence
cases.
TRUE
The balancing test is central to the concept of due care, and balances the likelihood that the
defendant's conduct will cause harmful consequences, taken with the seriousness of the harmful
consequences, against the effort required to avoid the harmful consequences.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #20

Topic: Sources of Values for Business Ethics


21.

The legal requirement of honoring confidentiality contains both formalist and consequentialist ethical
values.
TRUE
Many "insider trading" scandals have occurred because corporate agents illegally traded on
confidential information they learned from their positions in the corporation. The trading, itself, is
illegal and unethical, but also a detriment to the corporation.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #21
Topic: Sources of Values for Business Ethics

22.

There is no way to create enough rules to cover all possible ethically significant situations, even if
they could be identified in advance.
TRUE
As with achieving other challenging business objectives, there will be satisfaction in ethical business
decision making.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-03 To generate an individual framework for ethical values in business.
Reed - Chapter 02 #22

Topic: Sources of Values for Business Ethics

23.

Ambrose Bierce posited that individuals in large groups such as corporations feel more responsibility
and accountability for what happens in the group than they do for what happens in their individual
lives.
FALSE
Bierce once remarked that the corporation is "an ingenious device for obtaining individual profit
without individual responsibility."
AACSB: Analytic
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #23
Topic: Achieving an Ethical Business Corporation

24.

Of the world's 100 largest economies, 49 of them are countries and 51 are companies.
TRUE
General Motors has greater annual sales than the gross national products of Denmark, Thailand,
Turkey, South Africa, or Saudi Arabia. Wal-Mart's economy is larger than that of Poland, Ukraine,
Portugal, Israel, or Greece.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #24
Topic: Achieving an Ethical Business Corporation

25.

Profits and business ethics are not contradictory.
TRUE
Some of the most profitable businesses have also historically been the most ethical.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #25
Topic: Achieving an Ethical Business Corporation

26.

Those who argue that a system of property ownership is ethically moral do so by appealing to
strict formalism, arguing that the morality of property rights should be determined on an individual
basis.
FALSE
Supporters of property defend it through consequentialism, arguing that adequate property in
resources maximizes total wealth in society. It provides incentives for individuals and groups to
develop both physical and human resources to produce the goods that society values.
AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #26
Topic: Achieving an Ethical Business Corporation

27.

A business that does not act ethically severs itself from society, from the good, and ultimately from its
own source of support.
TRUE
Business plays a vital role in serving society, and we cannot isolate the impact of important business
decisions from their social consequences. For businesses merely to observe the law is not sufficiently
responsible.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #27
Topic: Achieving an Ethical Business Corporation

28.

Because property is a legal system created to focus on individual ownership, it contains no issues of
morality.
FALSE
Property provides an ordering of relations between people. It acknowledges that each person has an
exclusive sphere for private resources that all other persons must observe.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #28
Topic: Property as a System of Personal Ethics

29.

To harm others' safety and health, freedom of choice, or liberty of movement is to infringe their right
of property.
TRUE
Property applies both to what is mine and to what is yours. As a part of the system of property, you
must recognize what is mine but I also must recognize what is yours. Morally, as well as legally, each
must respect the equal right of others to what is proper to them.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #29
Topic: Property as a System of Personal Ethics

30.

A major concern of those who criticize property is the power over others conveyed by the possession
of great capital resources.
TRUE
Karl Marx saw capitalists as oppressing workers and exploiting their labor resources. Religious critics
often associate greed with property and argue that property discourages sharing and deprives us of a
spiritual focus to life.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-04 To evaluate the obstacles and rewards of ethical business practice in our property-based legal system.
Reed - Chapter 02 #30
Topic: Property as a System of Personal Ethics

31.

The Wealth of Nations was written by _____.
A. Adam Smith
B. Karl Marx
C. Emmanuel Kant
D. Euripides
E. Socrates
Adam Smith wrote The Wealth of Nations, perhaps the most famous book on economic theory ever
written.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #31
Topic: Contemporary Business Ethics


32.

Federal law and business leaders alike favor _____ as a means of governing private business
ethics.
A. creating uniform statutes of business ethics
B. self-regulation by companies
C. giving the federal government exclusive jurisdiction regarding ethics and ethics violation
enforcement
D. establishment of federal regulators in all private companies to establish and enforce ethical
standards
E. case-by-case determinations of what constitutes a breach of business ethics
Business leaders have become increasingly concerned with business ethics precisely because they

want to limit further governmental regulation. They recognize that by encouraging ethical conduct and
self-regulation within business organizations, they will prevent outside standards from being imposed
on them through public law.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #32
Topic: Contemporary Business Ethics

33.

Which of the following provides the best definition of ethics?
A. Ethics is a formal system for evaluating who profits in a business transaction.
B. Ethics is merely a different term for the laws and regulations created by a government.
C. Ethics is merely another word for morality, which is only involved in what is right and what is
wrong.
D Ethics is a simplified term given to the momentary decisions we all make regarding which answer
. will lead each person to the most personally successful solution.
E. Ethics is a formal system for deciding what is right and wrong and for justifying moral decisions.
Ethics involves a rational method for examining our moral lives, not only for recognizing what is right
and wrong but also for understanding why we think something is right or wrong.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #33
Topic: Property as a System of Personal Ethics

34.

Which is the best definition of "the good", as defined by philosophers?
A. Increasing profit margins on a quarterly basis.
B. The moral goals and objectives we choose to pursue.
C. The acquisition of all of the things necessary for having a good life.
D. Whatever makes an individual happy.
E. Eating meat and consuming alcohol.
The end result of ethical examination is what philosophers call the good. The concept of the good
is central to the study of morality. The good may be defined as those moral goals and objectives we
choose to pursue. It serves to define who we are. Thus, leading a good life means more than having
the good life. It means more than material possessions and luxury.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #34
Topic: Property as a System of Personal Ethics


35.

Mike is driving 15 miles over the posted speed limit when he is pulled over by Tom, a local police
officer. As Tom approaches the car, he hears Kathy in the front seat moaning in pain. Mike tells
Tom that Kathy is in labor and that he is rushing to the hospital. Tom issues Mike a speeding ticket,
nevertheless. Tom's ethical approach in this matter most closely matches:
A. utilitarianism.
B. relativism.
C. the Protestant ethic
D. formalism.
E. hedonism.

To a formalist, a particular act is in itself right or wrong, always and in every situation. For example,
lying is wrong. There are no justifications for it, and its wrongness does not depend on the situation in
which the lie is told.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #35
Topic: Property as a System of Personal Ethics

36.

Ethical formalists maintain that:
A. harm to an individual is allowable as long as it serves a greater good.
B. values are situational and change based on circumstance.
C. harm to individual rights is never justified by an increase in organizational or common good.
D. the good of the many always supersedes the good of the few.
E. right and wrong are unknowable.
For the formalist, the ethical focus is on the worth of the individual. Individuals have rights, and
these rights should not be infringed, even at the expense of society as a whole, because they have an
intrinsic moral value to them.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #36
Topic: Two Systems of Ethics

37.

The _____ emphasizes consistency and compels a person to act as he believes everyone should
act.
A. formalist theory
B. deontological imperative
C. categorical imperative
D. contractualist approach
E. relativistic approach
Within this ethical system, you should never act in a certain way unless you are willing to have
everyone else act in the same way. You cannot make an exception for your own actions.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #37
Topic: Two Systems of Ethics


38.

Who developed the theory of the categorical imperative?
A. Socrates
B. Plato
C. John Rawls
D. Immanuel Kant
E. Charles Darwin
For Immanuel Kant, to be ethical requires that you act with a good intent. To have a good intent,
you have to act in ways that are ethically consistent. Note the similarities between Kant's categorical
imperative and the Golden Rule: "Do to others as you would have others do to you."
AACSB: Analytic
Blooms: Remember

Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #38
Topic: Two Systems of Ethics

39.

For Immanuel Kant, to be ethical requires that a person act:
A. only under coercion.
B. only to benefit himself.
C. out of a sense of duty.
D. with a good intent.
E. without the influence of others.
For Immanuel Kant, to be ethical requires that you act with a good intent. To have a good intent,
you have to act in ways that are ethically consistent. Note the similarities between Kant's categorical
imperative and the Golden Rule: "Do to others as you would have others do to you."
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #39
Topic: Two Systems of Ethics

40.

Who developed the social contract theory?
A. John Rawls
B. Immanuel Kant
C. John Locke
D. Jack Sheppard

E. Plato
The social contract theory of Harvard philosopher John Rawls furnishes an important recent example
of how formalism has influenced thinking about business and personal ethics.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #40
Topic: Two Systems of Ethics


41.

The social contract theory concerns itself with how to construct a just society given:
A. the many inequalities of wealth, knowledge, and social status.
B. the difficulty of acting toward others as you would have them act toward you.
C. the many logical fallacies contained in legal contracts.
D. the implicit agreement that the powerful are best suited to govern.
E. the inherent nature of those in a society to argue and reject consensus.
To correct for the inequalities of wealth, knowledge, and social status, Rawls suggests a simple first
step in determining the ethical values on which a just society can be built. We should assume that we
do not know our age, gender, race, intelligence, strength, wealth, or social status.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #41
Topic: Two Systems of Ethics

42.

According to Rawls, it is important to forget our own age, gender, race, intelligence, strength, wealth,
or social status when determining just actions. What is the purpose of this?
A. This permits us to act as pure American citizens.
B. It keeps us from being self-interested in the ethical values we consider.
C. This makes each individual like a blank sheet of paper on which a contract may be written.
D. It makes it easier to consider the usefulness of our actions.
E. This promotes the assumption that what one personally needs or wants is morally correct.
This step is vital because it keeps us from being self-interested in the ethical values we consider. For
example, not knowing our sex or race, will we agree that it is ethical to discriminate in employment
compensation based on sex or race? Not knowing our wealth, will we agree that owning property is a
fair prerequisite to being able to vote? Not knowing our age or work status, will we agree that it is just
for a company to have mandatory retirement of its officers at age 65?
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #42
Topic: Two Systems of Ethics

43.

The "veil of ignorance" means that to think ethically you must:
A. lose the assumption that what you personally want or need is necessarily morally correct.
B.recognize that one cannot make valid ethical decisions unless they are totally unaware of the other
parties involved so as to eliminate bias.
Crecognize that one cannot make valid ethical decisions unless they are totally unaware of the
. circumstances leading to the ethical dilemma so as not to be influenced by unchangeable history.
D. put yourself in the position of those affected by your decision and act as you would want them to
act.

E. make every ethical decision as if you did not have any education in ethical or moral history.
Placing himself behind a veil of self-ignorance, Rawls proposes two ethical principles. First, everyone
is entitled to certain equal basic rights, including liberty, freedom of association, and personal
security. Second, although there may be social and economic inequalities, these inequalities must be
based on what a person does, not on who a person is, and everyone must have an equal opportunity for
achievement.
AACSB: Analytic
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #43
Topic: Two Systems of Ethics


44.

Making ethical or moral decisions to promote the common good is a significant principle of ethical
_____.
A. existentialism
B. daoism
C. utilitarianism
D. self-promotion
E. fundamentalism
The ethics of actions are measured by how they promote the common good. If actions increase the
common good, they are ethical. If actions cause overall harm to society, they are unethical.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #44

Topic: Two Systems of Ethics

45.

The dominant form of consequentialism is:
A. utilitarianism.
B. social contract theory.
C. the categorical imperative.
D. the Protestant ethic.
E. Marxism.
If formalism focuses on individual rights, consequentialism focuses on the common good. The ethics
of actions are measured by how they promote the common good. If actions increase the common
good, they are ethical. If actions cause overall harm to society, they are unethical.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #45
Topic: Two Systems of Ethics

46.

The values-based management approach to business ethics illustrates consequentialism through its
emphasis on:
A. teaching ethical values to management and supervisory personnel that enhances the profitability of
the company.
B. teaching ethical values to all employees that enhance the profitability of the company.
C teaching ethical values to management and supervisory personnel with the aim of avoiding ethical
. issues whether profitability is affected or not.
D. teaching ethical values to all employees with the aim of avoiding ethical issues whether profitability

is affected or not.
E. teaching ethical values to employees in order to punish them for unethical conduct.
Examples of values-based management include teaching why it is wrong to use company computers
for personal entertainment during work hours and why it is unethical to use company long-distance
phone service to contact friends and relatives.
AACSB: Analytic
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #46
Topic: Two Systems of Ethics


47.

Since the primary goal of business is to make a profit, this orientation mainly involves:
A. deontology.
B. formalism.
C. consequentialism.
D. absence of ethics.
E. Darwinism.
Unfortunately, with the decline of the Protestant ethic, emphasis on corporate profit alone sometimes
conflicts with ethical responsibility. How a profit is made becomes less important than that it is made.
Various business scandals illustrate this point.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #47
Topic: Two Systems of Ethics

48.

Business ethics reflects elements of:
A. formalism only.
B. consequentialism only.
C. both fundamentalism and consequentialism with a focus on formalism.
D. both fundamentalism and consequentialism with a focus on consequentialism.
E. neither formalism nor consequentialism.
Although business ethics reflect elements of both formalism and consequentialism, they focus more
heavily on the latter. Business leaders feel a need to justify what they do in terms of whether or not
it produces dividends for their shareholders. Their primary goal or end is to produce a profit. This
orientation reflects consequentialism.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 To compare the connection between law and ethical principles.
Reed - Chapter 02 #48
Topic: Two Systems of Ethics

49.

The Protestant ethic is rooted in:
A. utilitarianism.
B. consequentialism.
C. relativism.
D. formalism.
E. epistemology.
The Protestant ethic was rooted in a formalist approach: honesty and keeping promises were
intrinsically good. Religion provided the impetus to hard work and achievement. Human desire and

indulgence, said Protestants, should be bent to God's will through self-denial, rational planning, and
productivity.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-02 To analyze why ethical consequentialism and not ethical formalism has been the chief source of values for business ethics.
Reed - Chapter 02 #49
Topic: Two Systems of Ethics